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September 24, 2007

The Top Ten (Sixteen) Lies of Lawyers

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Like CEOs, marketers, engineers, entrepreneurs, and venture capitalists, lawyers tell their own specialized tales. Most of my experience is with lawyers who do work for tech entrepreneurs, so this is my focus.

  1. “I’m really excited about what you are doing and will give your company my personal attention.” Once someone gets to the partner level, making it “rain” is as important as doing “work.” This is part of a standard sales pitch, so don’t let it go to your head.

  2. “Our firm is really excited about what you’re doing, so we’d like to invest in your company too.” Also part of the standard sales pitch. Most firms invest in most of their startup clients—it’s simply the law of big numbers: Invest in enough dumb ideas, and one will turn out to be a Google.

  3. “We can work on the billing so that you pay us when you get financed.” The final flattery in a good sales pitch. As with the others, don’t think you’re special. This is a common offer.

  4. “I’ll have that to you by the end of the day.” The important question for you to ask when you hear this is, “End of exactly which day?” Because every day has an end. And you should find out how your lawyer defines the end of the day: 6:00 pm or 11:59 pm (thanks, zakstar).

  5. “Don’t worry about the date on that option grant; it’s not a big deal.” Unless you enjoy getting indicted, you should run from a lawyer who utters such stupidity.

  6. “The bill would be lower if it weren’t for the lawyers on the other side.” You do realize that the lawyers on the other side are saying this about your lawyers too, right?

  7. “I thought you were more interested in getting it right rather than saving a few dollars.” In other words, the legal bill for your series A funding may exceed the amount of capital raised.

  8. “Your case is much stronger than theirs; I’m sure we can convince them.” If your position is so strong, you don’t need lawyers. It’s when your position is weak that you need them. Also, your opponent is hearing the same thing about their case.

  9. “We have relationships at the highest level in Shanghai/Munich/Mumbai/New York/LA.” In other words, someone from the firm once flew in first class to Shanghai/Munich/Mumbai/New York/LA with the vice premier’s uncle’s sister’s nephew.

  10. “We’d much rather be on the company side than on the investor side.” Let me get this straight: Your lawyer would rather be on the side of two guys/gals in garage who are raising $500,000 than a venture capital fund managing $500 million whose partners play golf at the same country club?

  11. “We usually don’t bill the full retainer; it only happens if there are unforeseen issues that come up.” One of two things is happening: either you’ve been sandbagged with an artificially high estimate or your lawyer just passed the bar.

  12. “Sure we’re busy, but I’ll make sure you don’t get handed off to a green associate.” Translation: Your main contact passed the bar a year ago.

  13. “I’ve done work with Google/Microsoft/Apple, so I know how to structure deals with them.” Translation: “My favorite search engine is Google which I use on my Windows laptop while I’m listening to my iPod.”

  14. “We think you will have a very strong patent.” If you hear this, ask this question: “So if Microsoft infringes on it, we’d win?”

  15. “We know the opposing attorneys, so we’ll be able to work out something quickly and cheaply.” This is like asking the hotel concierge what restaurant he recommends. There is usually no such thing as quickly and cheaply. There’s only “good and expensive,” “quick and lousy,” and “cheap and lousy.” Pick one.

  16. “I can call several venture capitalists to help you secure funding.” Actually, you should select your lawyer as much for his/her connections to the venture capital community as much as legal expertise. However, take this very literally: He/she “can” call—this is different from “will” call.

My buddy Mathew Johnson suggested this topic, so if you’re a lawyer, and this posting upsets you, blame him.

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Comments

Guy:

Actually, I was fine with everything you said. You have a right to your opinion. Even if I don't agree with you. You even have a right to be wrong.

As I said, I was fine with it. Until, at the very end, you decided not to own it. Are ya kidding?

That's the first thing. Second, if it's a lie, anyway, why do you CARE if the posting upsets them?

They're LIES, right? If nothing else, they should be riven, and ashamed, that you called them on their scheevy (some people spell it scheevie; I don't much care, shame on me) prevarications.

Having said all of this. . .I'm not sure I saw anything up on this list that was actually a LIE. Except for number 5, but I simply cannot IMAGINE any attorney saying that, even a stupid one, and, I'm ashamed to admit this, I have KNOWN a few stupid ones, But they were very small, and almost transparent, so I don't think anybody else ever saw them. Or were those Poltergeists? I get so easily confused.

Moving on. . .I have some reservations about number 4, too, but, to be fair, it IS a fine point about clarity, precision, and answering ONLY what is asked. . .and any 1L who got trapped answering THAT question THAT specifically deserves what s/he gets, if you don't mind my saying so, and even if you do.

Besides, who said YOUR translations were right in the FIRST place? How do we know that YOU aren't lying? I'm just asking.

How about a list of the 16 lies clients tell their lawyers? My favorite is the one that they don't care about the money, only the priniciple of the matter. Then they get the first bill....

I'm a lawyer. I blame you for the post. How are people to reconcile:

* * *
“I thought you were more interested in getting it right rather than saving a few dollars.” In other words, the legal bill for your series A funding may exceed the amount of capital raised.
* * *

with...

* * *
“We know the opposing attorneys, so we’ll be able to work out something quickly and cheaply.” This is like asking the hotel concierge what restaurant he recommends. There is usually no such thing as quickly and cheaply. There’s only “good and expensive,” “quick and lousy,” and “cheap and lousy.” Pick one.
* * *

So your lawyer lies when they say quality doesn't come cheap, and your lawyer lies when they say you it's possible to get quality on the cheap?

I think the story is a lot more simple than your post implies. Virtually everything you listed suggested an unknown startup pointlessly hiring a massive corporate law firm. Surprise, they take you for a ride.

Why do that? Do you use Windows because Microsoft is the biggest computer company? Do you only buy the best selling album, watch the biggest blockbuster? Do you only shop at Wal-Mart?

Hiring a lawyer is no different from anything else: don't think snazzy packaging or popularity guarantees quality.

If you want a good lawyer, DO YOUR HOMEWORK. Ask around. Ask the lawyer exactly what their experience was, and why it helps you. If you don't like your lawyer, and they can't justify their bills, fire them and get a new one.

Sheesh. Lawyers are to blame because people put less thought into hiring them than they do into the type of chair they buy?

Let's look at Google's GC:

"Before joining Google, Kent held senior legal positions at a number of leading technology companies. Most recently he was Deputy General Counsel of eBay Inc., where he managed corporate legal affairs, litigation, and legal operations. Previously, he was Executive Vice President of Liberate Technologies, a leading provider of interactive services software founded by Oracle and Netscape Communications. He also served as Associate General Counsel for Netscape and America Online and Senior Counsel for AirTouch Communications, which was later acquired by Vodafone."

He knows what he's doing.

And you're upset because you hired "some lawyer at a big firm that does securities or something" and they spend your money for minimal service? I can pick up the phone and call a dozen people with >10 years of high-risk technology investment experience. A buddy of mine has >25 years experience customs disputes.

DO YOUR HOMEWORK. You ask around before hiring something as minor as a mechanic or a plumber -- why not do that for the man/woman who will bill you tens of thousands to ensure your company doesn't collapse in a lawsuit or indictment?

you forgot the big "bait and switch" - after telling you for months how great your case is and what a big injustice you have suffered - right before trial starts, you are informed that a jury trial is all a big crapshoot and there is nothing they can do about it.

As a law student finishing up and preparing to take the bar next year, this list is showing me a whole different side of my chosen profession. Haha I guess with that list most lawyers whill now look for better pitches or lines to woo clients. ^_^

Perfect. As a CEO on my second successful startup I have heard EVERY one of these. Even with excellent, well meaning counsel.

Keep lawyers and your business separate...

“Our firm is really excited about what you’re doing, so we’d like to invest in your company too.”

Above, while tempting (seems it seems as a way to save $), is a no-no; same as "deferring" legal expenses in lieu of "stocks/ownership". Above will create a biased ("blind-folded") legal team, one that you need unbiased/100% functional when it matters the most.

ceo

I'm a lawyer, and I love it!

In any profession there are tons of murky people. It seems like there are more in the legal field probably because the lies told have a huge affect (millions of dollars, or more) versus your average person. Or maybe the profession attracts murky people?

The secret is to always remember that a lawyer is in the business of making money, so that's their motivation -- to bill more hours. Yes, the good ones want to also help you, but they are still pressured by their partners who just want to bill more hours.

That's why I left to be an internet entrepreneur. :)

Elizabeth

I wonder why certain professions get such bad reputations?

Great #10...maybe find a lawyer who doesn't play golf?

This is a great post. It would be highly beneficial to start up young entrepreneurs. Keep up the good work.

Take care picking a lawyer on the basis of his VC contacts, it creates a moral hazard problem.

The lawyer may be more interested in maintaining a strong long-term relationship with the VC than in giving advice which harms the VC and benefits you.

Well, I knew you loved the San Jose Sharks in the NHL but I guess the "lawyer sharks" aren't as high up on your list:)

Wish you could have made the OSTEC AGM last week in sunny Kelowna, BC Guy! We were lucky enough to have Lance Armstrong here on Saturday raising funds for cancer research!

Where there's lots of money to be made, it will draw the shysters. Having said that, I've come across several fair and hard-working high tech attorneys.

Ouch! Are they really "lies" or just little untruths? :)

#4 - Don't forget to also ask what time zone that day ends.

"Don't worry, I have a good reputation with this judge."

"Don't worry about the court's deadline, we get two automatic extensions."

"Don't worry, we'll take care of this issue before it goes to trial."

"Don't worry, there are no appealable issues."

"Don't worry, I put my best teammember on your case."

“...it only happens if there are unforeseen issues...” Ummm, there are *always* unforeseen issues that come up! Buyer Beware.

As an attorney who specializes in IT-related negotiations, the list is scary, yet highly accurate.

What I think most people forget (need to know) is that lawyers, like many other professions, come out of school knowing virtually NOTHING about how to actually do the things they're licensed to do. Nowhere is this more accurate than in the corporate law world and in intellectual property, and it's downright frightening with respects to criminal law and personal injury issues.

I deal with "opposing counsel" on a daily basis when talking about licensing deals and other contractual negotiations. I almost enjoy it when they introduce themselves because I know how green they are, even if they've been a lawyer for decades. [Except when I hear that they're "outside counsel" (which means they aren't an employee of the other side).] What it means for me is that I'm going to be able to win almost every point I want - even if it takes forever because they're billing by the hour.

Folks, if you're a startup and you need help in a particular area, find SPECIALISTS with demonstrable experience in what they're going to assist you on. Need someone to help you secure funding? Serve as corporate secretary (to write those board minutes like Kendall wrote about above)? Negotiate contracts? File for patents/trademarks or copyrights?

All of those are DIFFERENT areas of the law - and it will be rare to find a single individual who knows it all well enough to be an expert at it. In fact, with the exception of filing for patents and trademarks, none of those really require a licensed attorney to help you. A little shopping around will save you immensely.

Great list, Guy!

17. "Oh yeah, we can handle that for you. From The Art of the Start: "To review venture capital finance work, you should not hire Uncle Joe the divorce lawyer because he's cheaper, or a Wall Street firm simply because it has a big name."

:-)

Guy:

Easy pickings with lawyer bashing! I think the most important thing to understand when dealing with a group of people who you don't share a natural culture with is to understand semantics. When someone says something, the words that come out of their mouth might not mean what you, in your culture, interprete them to mean. Also, I think getting it in writing would help, if you could convince a lawyer to write in words that convey meaning to people other than other laywers! I cross-posted on your piece to http://blog.innovators-network.org The Innovators Network is a non-profit dedicated to bringing technology to startups, small businesses, non-profits, venture capitalists and intellectual property experts. Please visit us and help grown our community!

Best wishes for continued success,

Anthony Kuhn
Innovators Network

This is funny, but lawyer jokes are kind of easy, aren't they?

As partial counterpoint, check out this piece I wrote for Found|Read:
http://tinyurl.com/2cgp9u

Amusingly, the article is called "how to work your lawyer". There was supposed to be a "with" in there.

Personally, I side with Caesar on the Lawyer issue, unfortunately, it appears we do not have enought ammo? Lawyers of course are not the only professional parasites that entrepreneurs of start-ups must deal with. Lawyers like the others are in business to make the most possible money as possible for the least amount of work - human nature? They are indeed pretty good at what they do, making money for themselves. I personally trust all lawyers as far as my cat can throw them.

Thanks for the great post - just what I was hoping for.

This is an important one for entrepreneurs who haven't taken any outside investment yet - but are still getting billed (not just by lawyers) like they already have.


http://mattishness.com

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